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In this article we offer a view that suggests that a firm's critical resources may span firm boundaries and may be embedded in interfirm resources and routines. We argue that an increasingly important unit of analysis for understanding competitive advantage is the relationship between firms and identify four potential sources of interorganizational competitive advantage: (1) relation-specific assets, (2) knowledgesharing routines, (3) complementary resources/capabilities, and (4) effective governance. We examine each of these potential sources of rent in detail, identifying key subprocesses, and also discuss the isolating mechanisms that serve to preserve relational rents. Finally, we discuss how the relational view may offer normative prescriptions for firm-level strategies that contradict the prescriptions offered by those with a resource-based view or industry structure view.
Scholars in the strategy field are concerned fundamentally with explaining differential firm performance (Rumelt, Schendel, & Teece, 1991). As strategy scholars have searched for sources of competitive advantage, two prominent views have emerged regarding the sources of supernormal returns. The first-the industry structure view-associated with Porter (1980), suggests that supernormal returns are primarily a function of a firm's membership in an industry with favorable structural characteristics (e.g., relative bargaining power, barriers to entry, and so on). Consequently, many researchers have focused on the industry as the relevant unit of analysis. The second view-the resource-based view (RBV) of the firm-argues that differential firm performance is fundamentally due to firm heterogeneity rather than industry structure (Barney, 1991; Rumelt, 1984, 1991; Wernerfelt, 1984). Firms that are able to accumulate resources and capabilities that are rare, valuable, nonsubstitutable, and difficult to imitate will achieve a competitive advantage over competing firms (Barney, 1991; Dierickx & Cool, 1989; Rumelt, 1984). Thus, extant RBV theory views the firm as the primary unit of analysis.1
Although these two perspectives have contributed greatly to our understanding of how firms achieve above-normal returns, they overlook the important fact that the (dis)advantages of an individual firm are often linked to the (dis)advantages of the network of relationships in which the firm is embedded. Proponents of the RBV have emphasized that competitive advantage results from those resources and capabilities that are owned and controlled by a single firm. Consequently, the search for competitive advantage has focused on those resources that are housed within the...